Shares left worthless as lenders seize debt-laden Yellow Pages
Small investors wiped out as directory publisher admits annual losses have ballooned to £2bn
Friday 26 July 2013
Thousands of small shareholders in Yellow Pages' owner Hibu were left to count the cost of its £2.3bn collapse yesterday as the company was handed over to lenders in a debt-for-equity swap.
Hibu's ignominious end as a listed company had long been expected as it struggled under debts built up before its 2003 stock market float and during an acquisition frenzy afterwards.
The shares were suspended at 0.17p – an astonishing plunge from a peak above 600p in 2007.
The company underlined the dire state of its finances by admitting in long-delayed annual results that it lost £2bn in the year to March.
Hibu has some 300 lenders, including the taxpayer-backed Royal Bank of Scotland and Barclays, which will now take control following Hibu's delisting from the stock market.
The company's chief executive, Mike Pocock, has asked them to back a refinancing in a plan which will see the company's debt load slashed to £580m, with the lenders owning a further £920m in loans that will be converted to stock later. He said one third of the lenders have already backed the plan and he was "optimistic" the necessary 75 per cent would approve it by the autumn.
Although Hibu's long-standing lenders have lost out, some City funds have bought up the debt cheaply in the recent past, as it became clear Hibu was approaching collapse.
George Soros's Soros Fund Management will have one of the biggest stakes, with around 8 per cent, following the debt-for-equity swap.
Mr Pocock, who joined in 2011 to salvage the company, claimed that Hibu's end as a listed company was not bad news as it ended more than a year of uncertainty.
"In many respects, it's a good day for us," he insisted. "The refinancing of the balance sheet will be something that will give this company something to focus on for the future, rather than the present or the past."
Hibu's chairman, Bob Wigley, told shareholders in a letter that the refinancing would safeguard the jobs of the company's 12,000 staff and lay the foundations for a "sustainable transformation to a digital business with global capacity".
But Alex de Groote, an analyst at the broker Panmure Gordon, forecast there would be big cuts. "I think it will be carnage," Mr de Groote said. "They'll take lots of heads out. I think the business will be pared right back and the focus will be on generating as much cash as possible."
All of Hibu's non-executive directors, including Mr Wigley, will step down.
Hibu, which was known as Yell until a controversial rebranding a year ago, went on a debt-fuelled acquisition spree in the boom years under previous chief executive John Condron, and also suffered as customers switched to the internet and Google.
Mr Wigley said: "When I joined the company four years ago, it had £4bn of debt, a CEO who had been here 29 years and it didn't have a comprehensive digital strategy and was within months of going bust."
He maintained that Hibu has made progress in digital, which is now 38 per cent of turnover, even though group revenues plunged 16 per cent and Ebitda operating profits crashed 38 per cent in the year to March. Its digital services sales climbed by just over a fifth to £49m. Revenues from its printed directories were down by 19 per cent to £183m.
Mr Pocock insisted that morale is "surprisingly good", despite two US executives being dismissed earlier in the year, and offered "no apologies" for paying staff bonuses in April, even as investors were wiped out.
He has not considered resigning. "You either love to do transformations or you don't," he said.
Yellow pages: Telephone number windfalls
Investors big and small have seen their shareholdings wiped out by the collapse of Hibu, but some of the biggest names in the City made a fortune out of the company, formerly known as Yell, during its go-go years before the crunch. These are some of the key players:
John Condron,former chief executive
His empire-building, which culminated in the hugely over-priced £2.3bn acquisition of the Spanish version of Yellow Pages in 2006, caused Yell to take on far too much debt. Mr Condron joined in 1980 and ran the company until 2010. He reportedly received £3m when BT sold Yell in 2001, and was said to have landed shares worth £20m at the time of the 2003 float.
John Davis, former finance director
Mr Condron's long-serving right-hand man received upwards of £10m from the float and was by his boss's side right up until 2010.
The private equity firm teamed up with the venture capitalists Hicks, Muse, Tate & Furst to buy Yell from BT in 2001 and plumped it up for the £2bn float in 2003, when it was saddled with a hefty £1.3bn of net debt — even before Mr Condron went on his ill-fated acquisition spree. Apax and Hicks, Muse, Tate & Furst doubled their money and were criticised for receiving an additional £28m management fee for working on the float.
Stephen Grabiner, a partner at Apax at the time, was rumoured to have earned as much as £10m from the float.
Simon Dingemans was lead banker for the bank, which was joint bookrunner on the float. Now chief financial officer at the drugs giant GlaxoSmithKline, his team was likely to have received close to £10m in fees from the float.
Bob Wigley was the lead banker at the other bookrunner. The US bank will have received similar fees to Goldman. To give credit to Mr Wigley, he returned to the company in 2009 as chairman in a bid to save it. He wrote to shareholders yesterday to say: "As a significant investor in the company's shares myself, I am as disappointed as you."
The PR firm Citigate Dewe Rogerson readied Yell for the float, which was five times oversubscribed. When things turned sour, JP Morgan Cazenove, Deutsche Bank, Roths-child and Bank of America Merrill Lynch all worked on a 2009 rights issue to raise £660m.
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